Mortgage Calculator

About mortgages

A mortgage is usually the longest and most expensive commitment in life. Two decisions have the biggest impact on its cost: the installment type and the interest type.

Principal and interest parts of an installment

Every installment splits into two parts. This is key to understanding why the debt drops so slowly at first.

Principal part — is repayment of the borrowed capital. Only this part actually reduces your debt.

Interest part — is the cost of borrowing — the bank's earnings. This money does not lower the loan balance. With equal installments, interest makes up most of the payment early on, which is why the balance falls slowly — visible on the chart above.

Equal or decreasing installments?

Equal (annuity) installments stay the same for the whole loan – early on interest makes up most of the payment, and over time the principal share grows. Lower starting payment, but higher total interest.

Decreasing installments have a constant principal part, so the payment is highest at the start and falls every month. They require higher creditworthiness, but the total interest cost is lower.

Variable or fixed rate?

A variable rate is the sum of a reference rate (WIBOR or WIRON) and a fixed bank margin. The installment changes with interest rates – it falls when rates drop and rises when they go up.

A fixed rate stays unchanged for a set period (under Recommendation S usually at least 5 years), after which the loan typically switches to a variable rate. It gives a predictable installment during that period.

What are the bank margin and the reference rate (WIBOR/WIRON)?

With a variable rate, the loan rate is the sum of two parts: the reference rate and the bank margin. In this calculator you enter their sum as a single rate, but it helps to understand what it is made of.

Reference rate (WIBOR/WIRON) — is a market interest rate, independent of the bank. It changes over time with central bank rates, which is why a variable-rate installment can rise or fall. WIRON is gradually replacing WIBOR as the reference index.

Bank margin — is the fixed part of the rate — the bank earnings — agreed in the contract and unchanged for the whole loan term. This is mainly what you negotiate: the lower the margin, the cheaper the loan, regardless of swings in the reference rate.

Does it pay to overpay your mortgage?

An overpayment is a payment above the required installment that reduces the principal in full. You can use it to shorten the loan term (the biggest interest saving) or to lower the installment. The earlier you overpay, the more you save — because interest is highest at the start.

Before overpaying, compare your loan rate with a safe return on savings. If treasury bonds or a deposit yield less than your loan rate, overpaying usually pays off. It is also worth factoring in inflation, which gradually reduces the real burden of the debt.